Review and Forecast


California Contractors Face Mixed Outlook in 2025


BY KEN SIMONSON


AGC OF AMERICA CHIEF ECONOMIST


areas, construction employment changes between October 2023 and October 2024 ranged from feeble to dismal. Employers in the San Diego-Carlsbad metro area boost- ed their headcount by 2%. Employment changed by less than 1% in both divisions of the Los Angeles-Long Beach-Anaheim metropolitan area and the Bay area’s Oak- land-Hayward-Berkeley division. Tat was far better than the 6% decline recorded by the San Francisco-Redwood City-South San Francisco division. Employment also decreased in Riv-


erside-San Bernardino-Ontario (-2%), Sacramento-Roseville-Arden-Arcade (-4%), and San Jose-Sunnyvale-Santa Clara (-5%). Political changes in Washington, DC


C


onstruction activity in California varied by project type and location in 2024. For 2025, contractors can


expect further variability – with a large dollop of uncertainty added to the mix. Statewide last year, total construction


employment slipped in February from a 17-year high in January as the state was pummeled by relentless storms. Industry employment more or less flatlined for the next eight months.


Te October total was 0.2% less than a year earlier, reflecting small upticks in employment at both residential and nonresidential building construction firms and slight declines at specialty trade contractors and heavy and civil engineering construction firms. Te lack of growth stands in contrast


to construction employment nationally, which climbed 2.8% from October 2023 to October 2024. This dichotomy has persisted for nearly three years. After falling steeply at the beginning of the


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CALIFORNIA CONSTRUCTOR JANUARY/FEBRUARY 2025


Political changes in


Washington, DC will affect construction in California, and elsewhere. Contractors anticipate fewer federal regulations and a much less


sympathetic approach toward California’s more stringent regulatory initiatives.


pandemic in 2020, construction employ- ment returned to pre-pandemic levels in the United States and California by early 2022. Since then, however, employment


nationwide grew 9% by October 2024, while statewide construction employment rose less than 2%.


Construction Breakdown by Region Among the state’s major metropolitan


will affect construction in California and elsewhere. Contractors anticipate fewer federal regulations and a much less sym- pathetic approach toward California’s more stringent regulatory initiatives. Tey also expect the extension and possible expansion of federal tax reductions en- acted in 2017. But potential policy shifts regarding foreign-born workers and im- ports would most likely be detrimental to California construction.


Headwinds From Population Loss, Higher Tariffs An important headwind for construction – and other businesses – in the state has been population loss. After decades of increasing at a faster clip than the nation as a whole, California has lost residents for three years in a row. The outflow slowed sharply from 358,000 in the 12 months before July 1, 2021 to 75,000 in 2023. Te reduced pop- ulation loss is due largely to an increase in immigration in 2023, which exceeded emigration from the state to other countries following two years of declines. However, immigration is at risk of be- ing sharply restricted, and both voluntary


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